John Kostrzewa: All boats rise in an innovation economy

Middle-income workers who haven’t had a pay raise in years may not see much of a connection to the high-wage, high-skilled jobs in technology, life sciences and medical research that Rhode Island’s leaders are chasing. But they are linked.

Middle-income workers who haven’t had a pay raise in years may not see much of a connection to the high-wage, high-skilled jobs in technology, life sciences and medical research that Rhode Island’s leaders are chasing.

But they are linked.

And that’s why the development of the Route 195 land, the renovation of the South Street Power Station and the growth of entrepreneurial activity and startups is critical to Rhode Island’s future.

Don’t just take my word for it. Listen to the researchers who have studied emerging economies and their impact on jobs and wages. Listen to people like Enrico Moretti.

Moretti, an economics professor at the University of California, Berkeley, studied data on workers in 320 metropolitan areas in the United States and found a wide disparity in the aftermath of the Great Recession. Some regions are booming while others are stuck with weak job growth and stagnant wages. (Sound familiar, Rhode Islanders?)

Innovation key

He also found that the areas that have prospered have attracted and encouraged innovative employers and highly educated, highly skilled workers in sectors such as software, biotechnology and digital information technology.

He said that model for development creates “brain hubs” and “innovation clusters” that spur all kinds of economic activity.

Here’s another finding that will catch the attention of Rhode Islanders.

“For each new innovation job in a city, five additional jobs are created — not only in professional occupations (lawyers, teachers, nurses) but also nonprofessional occupations (waiters, hairdressers, carpenters),” Moretti wrote.

“This matters for wages, too,” Moretti said.

For example, he studied two cities — Austin, Texas, and Raleigh, N.C., — where the standard of living has outpaced other areas.

He concluded, “In 1980, salaries for workers with a high-school diploma in Austin and Raleigh were significantly lower than the national average. Then those cities became important hubs for information technology and life science, respectively. Salaries are now 45 percent higher than average and the gap keeps expanding. High school graduates in Austin and Raleigh don’t work harder or have higher IQs. The ecosystem around them is different.”

In contrast, the economies in other geographic areas such as Rhode Island that were based on traditional manufacturing continue to struggle — five years after the end of the national recession.

Moretti found that for each new manufacturing job in an area, only 1.6 jobs are created in occupations that serve the manufacturing industry. And the wages paid are not as high as those for the service and support jobs created in the “brain hubs.”

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“Most industries have a multiplier effect,” Moretti wrote. “But none has a bigger one than the innovation sector …. Clearly, the best way for a city or state to generate jobs for everyone is to attract innovative companies that hire highly educated workers.”

An R.I. ‘brain hub’?

So how does Rhode Island create a “brain hub”?

One key step is to encourage collaboration among the area’s assets — university researchers, well-educated students, entrepreneurs and business innovators. When they get together and “collide,” as Moretti suggests, they will generate ideas, new companies, jobs and wage growth.

To kick-start that collaboration, there also has to be a place where innovators gather, eat together and talk, outside the labs on university campuses.

In Providence, why can’t new enterprises, innovative companies and academic researchers be coaxed to locate in the same or nearby buildings on the vacant land freed up by the relocation of Route 195.

Already, the Brown’s medical school is a hotbed of activity in the Jewelry District. Just down the street, the proposed rebuilding of the vacant former South Street Power Station (also known as the Dynamo House) would create a new home for the nursing programs of the University of Rhode Island and Rhode Island College, with administrative offices for Brown University.

And then there’s the entrepreneurial companies such as Nabsys, Mnemosyne Pharmaceuticals, EpiVax, G-Form and others near the district.

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That’s a solid core to build on. And that’s why it’s so disappointing that the Route 195 Redevelopment District Commission said the proposals it has received so far for the 19 developable acres include “concepts for residential, including hospitality, and for commercial, recreational and retail.”

None of those sound like “brain hub” industries. If the commission is not attracting innovative companies and proposals, why can’t government, business and nonprofit leaders step up and work together to come up with ideas or incentives to coax them to the district?

If they don’t, there’s real danger that will damage Rhode Island’s future.

Rhode Islanders who care about jobs and wages — for themselves and their children — need to find a way to get into the group of metropolitan areas that are creating new economies based on innovation, applied science and brain power.